Need investing advice for elderly mother

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Topic Author
InvestingDoofus
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Joined: Wed Jan 25, 2023 5:39 pm

Need investing advice for elderly mother

Post by InvestingDoofus »

My mother is retired and 74 years old. She had a stroke and lost some of her cognitive abilities and is no longer able to manage her money, so managing her finances abruptly fell into my lap.

Anyhow, a bit about her assets and income:

300k House, 50k left on the mortgage (5% interest rate)
200k in savings
75k in IRA savings
1,750 per month for social security

Her expenses:

Equal approximately 2,300 per month.

400 a month of that is a car payment, which will kick out in 3 years or less if she is no longer able to drive.

She lives in PA, the state income tax rate is 3.07 percent.

Anyhow, she has a shortfall of about 500 a month. She does not want to sell her car or house yet.

She had all of her money in awful investments, IRA savings and savings accounts that were making about a tenth of one percent APY.

I moved her savings into an account paying 3.5% APY and moved her IRA savings into Fidelity. I figure at least while interest rates are high, I can get her close to breaking even on her monthly expenses by means of CD interest.

I am wondering what a suitable route would be for fairly low risk investments which will carry her through her retired years? Her mother and grandmother both lived into their early 90s, so I want to plan for around that age for her also.

I was thinking about just doing CD ladders both in and outside of her IRA. Are there any other low risk alternatives which would make more sense?

Thank you.
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retired@50
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Re: Need investing advice for elderly mother

Post by retired@50 »

InvestingDoofus wrote: Wed Jan 25, 2023 6:04 pm 300k House, 50k left on the mortgage (5% interest rate)

Are there any other low risk alternatives which would make more sense?
Welcome to the forum.

If you (and your mom) are only comfortable with CDs and bank accounts, then I'd consider paying off the 5% mortgage - which will reduce her liquidity, but will provide a guaranteed return of 5%.

For long term investing in the markets, I'd consider something like 30% stock / 70% bond portfolio of index funds.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Peter Foley
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Re: Need investing advice for elderly mother

Post by Peter Foley »

Just a note. If Social Security is her only income, you can do some tax free withdrawals each year from her IRA.

Does she pay any income tax at all?

Depending on the interest rate, I would consider paying of the car loan first.

As to investing, 30% to 40% stocks would be the maximum if you have the risk tolerance to stay the course.
nextmilenium
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Re: Need investing advice for elderly mother

Post by nextmilenium »

Paying off the car and mortgage should be the priority as it is a guaranteed return.

For her age, I would not recommend any funds that contain stocks as even the most conservative funds can take -20% or more in a big down market. She may not have the time to recover.

For now, CD ladder sounds like a good way to go.
HomeStretch
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Re: Need investing advice for elderly mother

Post by HomeStretch »

Welcome to the forum!

For fixed income investments, consider US Treasuries purchased in a Fidelity Taxable account. Your mom’s after tax yield for 13-,26-,52-week T-Bills will likely be 4.5%+ (you can check recent auction results).

Before paying off the house and car loans, evaluate how much in safe, fairly liquid funds your mom should maintain if you foresee her requiring more paid care in the near future.

Does your mom have a durable power-of-attorney (DPOA) and healthcare POA naming you as her representative? Is the DPOA on file with her financial institutions?
bmcgin
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Re: Need investing advice for elderly mother

Post by bmcgin »

There is something else to consider. Most of the people in bogleheads would not recommend it. Nonetheless, it would work.

In this case, income is needed. JEPI is excellent at generating income and it pays monthly. In regular markets, the fund's documentation says it pays around 6% to 8% per month. It has been paying over 10% per month in the current down markets.

The good thing about a dividend is that it gets paid regardless if the stock goes up or down. So if all her funds were put into JEPI, a 6% or more dividend could be expected each month. (As with any investment, there's always a possibility of losing money.) Dividends are paid based on the number of shares held and not the price of the stock (or ETF).

Investing $270,000 (one IRA account and one taxable account), it should pay between $1,375 and $2,291 monthly. The principle will fluctuate as the market goes up and down. In this case, ignore that and focus on the dividend as the goal here is income and not growth.

And there will be lots of people who will not recommend this because it puts all the eggs in one basket (and other reasons). And that does increase risk. One good thing is that JEPI is a diversified ETF. Many people are doing exactly this plan. Last year it had the 8th highest inflows of all the ETFs. It's worth considering and can generate income if it's needed.

Of course, money market accounts, treasuries and CDs are preferred if they can kick out enough income. Possible a mix of these and JEPI could be ideal. $100k in JEPI still pays nicely.
water2357
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Re: Need investing advice for elderly mother

Post by water2357 »

Please look into the PA Medicaid rules and long term care options. You need to plan for her long term care in the event that her health requires more care. And PA Medicaid rules and long term care in PA are quite complicated with many pitfalls. However, there is also quite a bit of help available to provide for her care in PA if you know where to look and don't run afoul of any PA regulations. I would suggest at least consulting with an elder care lawyer, who can give advice on how to be sure that her care will be provided for financially, not to preserve assets for inheritance, but to actually provide for her care.

The best non profit care facilities in PA generally require that the resident be able to pay for at least 2 years of their care and then be sure the facility will keep the resident and accept Medicaid as payment. You need to have a power of attorney for your mother that is in compliance with PA law. It is very difficult to handle someone's finances in PA if that person cannot sign for everything themselves. If your mother's condition were to decline, you need to be sure you have the ability through a POA to act for her both financially and for her medical needs.

Until you understand PA requirements, the best course would be to do as you have done. Find the safest, lowest risk FDIC insured or Treasury securities that will allow you to access them with little to no penalty if needed unexpectedly and the highest interest rate.

As for the house and car, please talk to someone who totally understands PA Medicaid rules before doing anything with them. In PA an adult child who lives in the parent's home while acting as their primary care giver for several years (2?) may preserve the ownership of the home after the parent qualifies for Medicaid.

Look for a "certified elder law attorney" here is the association's website https://nelf.org/ talk to several to find one that fits what you need. Some are more interested in estate planning, look for one that is interested in obtaining the best care for your mother with the finances available.

Remember, only sign for your mother as POA, or you will end up responsible for whatever you sign. Do not sign long term care contracts as POA without having them reviewed by a lawyer. And if your mother has a safe deposit box, make sure you are listed on the box as her deputy and can access the box if she can no longer access it in person. Unfortunately, once your mother can no longer sign in person as needed, it may be expremely difficult to obtain the documents in PA to sign for her or to access her safe deposit box. Talk to the manager of her bank about that bank and that branch's specific requirements now.
rossington
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Re: Need investing advice for elderly mother

Post by rossington »

Is the SS figure of $1750 net of the monthly Part B premium?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Topic Author
InvestingDoofus
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Joined: Wed Jan 25, 2023 5:39 pm

Re: Need investing advice for elderly mother

Post by InvestingDoofus »

Peter Foley wrote: Wed Jan 25, 2023 7:36 pm Does she pay any income tax at all?
She was working in the first half of 2022, until the stroke. She did pay income tax. I don't foresee her having any sources of income outside of social security and whatever interest / dividends she makes on her investments going forward.
rossington wrote: Thu Jan 26, 2023 5:36 am Is the SS figure of $1750 net of the monthly Part B premium?
Yes, $1,750 net.
water2357 wrote: Thu Jan 26, 2023 4:17 am Look for a "certified elder law attorney" here is the association's website https://nelf.org/ talk to several to find one that fits what you need. Some are more interested in estate planning, look for one that is interested in obtaining the best care for your mother with the finances available.
Thank you. I did get POA. Talking to an elder care attorney definitely sounds like a good idea. I will do that.
bmcgin wrote: Thu Jan 26, 2023 12:37 am There is something else to consider. Most of the people in bogleheads would not recommend it. Nonetheless, it would work.

In this case, income is needed. JEPI is excellent at generating income and it pays monthly. In regular markets, the fund's documentation says it pays around 6% to 8% per month. It has been paying over 10% per month in the current down markets.
Thank you. I will look into it.
HomeStretch wrote: Wed Jan 25, 2023 9:31 pm Welcome to the forum!

For fixed income investments, consider US Treasuries purchased in a Fidelity Taxable account. Your mom’s after tax yield for 13-,26-,52-week T-Bills will likely be 4.5%+ (you can check recent auction results).

Does your mom have a durable power-of-attorney (DPOA) and healthcare POA naming you as her representative? Is the DPOA on file with her financial institutions?
Partially, I do have POA but not on file with the financial institutions. We definitely need to get that done. I will check into treasuries. Thank you.
the_wiki
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Re: Need investing advice for elderly mother

Post by the_wiki »

How much would paying off the house and car reduce her expenses? Yes it eats up maybe 1/4 of her savings, but if it makes her able to survive mainly on Soc Sec income, then it is probably worth it.

I would probably invest SOME of the money. It's really the only way to beat inflation, even if there is some risk.
TheGiantess
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Re: Need investing advice for elderly mother

Post by TheGiantess »

If you haven't already, I would bring her to the bank and have her add you to her checking accounts and other bank accounts so you can pay bills and move money. My brother and I are my mom's durable power of attorney for medical and financial but when she was in the hospital the bank didn't want to allow me to renew her CDs even though I brought in all of the legal papers done by an attorney. They had me try to call her at the hospital then take the papers to her to sign. Fortunately she was able to but it really made me mad. The one thing they said was since I was on her checking account, they may have let me do it if she had been incapacitated.
Good luck.
TG
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Watty
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Re: Need investing advice for elderly mother

Post by Watty »

InvestingDoofus wrote: Wed Jan 25, 2023 6:04 pm My mother is retired and 74 years old. She had a stroke and lost some of her cognitive abilities.....
I obviously do not know you mom but it really sounds like she may be at the point where she needs to give up driving.

There was a recent thread about senior drivers and when they should give up driving and someone pointed out how to get them evaluated to see if they should give of driving. The entire thread is worth reading but in particular this post.

viewtopic.php?p=7044722#p7044722

That thread also talks about some of the state laws which can let a relative or doctor request a driving evaluation of a senior. Hearing her doctor say that she needs to give up driving might be better received than you telling her that.

Before anything else it would be good to have her driving evaluated.

The situation was a bit different but my mom survived my dad and she insisted on staying in the large single family home I was raised in. There were few public transportation options and she drove for a lot longer than she should have. Staying in the house was her choice and I understand it but it was not a good situation since it was very socially isolating. For years we tried to get her to move to some sort of senior community(not assisted living) but she would not do that.

You may be able to get her doctor office involved with getting her into a better housing situation for her. They may have social workers that can get involved.

If she would agree to give of the car and sell the house that would make her finances a lot more secure.
dharrythomas
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Re: Need investing advice for elderly mother

Post by dharrythomas »

I’d pay off the house. Based on the info provided, I’m assuming, she is not itemizing her taxes.

Since you went to Fidelity, I’d use Fidelity Freedom Index for someone who is already retired for the IRA.

She’s going to have to start taking RMDs from the IRA.

Depending on her ability to drive, I’d revisit selling the car. You not only save the payment, but also insurance. Depending on the loan, you could consider paying off the car also.

Without the house and car payment, she should be at about the median retirement savings for someone her age and have a positive cash flow.

What you can’t do is take the bulk of her savings, invest it in CDs and expect it to be OK for 20 years. The math doesn’t work! You have to generate some income/growth on that portion also.
Harmanic
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Re: Need investing advice for elderly mother

Post by Harmanic »

the_wiki wrote: Thu Jan 26, 2023 10:14 am How much would paying off the house and car reduce her expenses? Yes it eats up maybe 1/4 of her savings, but if it makes her able to survive mainly on Soc Sec income, then it is probably worth it.

I would probably invest SOME of the money. It's really the only way to beat inflation, even if there is some risk.
It would increase cash flow. It could be enough to cover her monthly shortfall. Also if she pays tax, the interest saved will be above the nominal rates on the loans, since they are after tax. So paying a 5% mortgage could by like getting a 6% pre-tax investment. And it is a guaranteed return.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
SpaghettiLegs
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Re: Need investing advice for elderly mother

Post by SpaghettiLegs »

Having a mom who is 80 and feeble, I can sympathize with your situation. I would first look into paying off the car and if too much for you or your mom look into trading in or selling, then buying something that eliminates the car payment. That being said, having helped my Mom buy a car a couple years ago, I recognize that can be a challenge ( comfort of the seat was paramount, so we had to get another kind of expensive Subaru).

Just a few days ago, I drove 3 hours to help my Mom renew her drivers license and it was clear to me that she probably shouldn’t be driving, but unfortunately in today’s USA, not driving imposes a significant financial and social burden for most people.
JDave
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Re: Need investing advice for elderly mother

Post by JDave »

I'm surprised (or not, knowing Bogleheads bias against them) no one has suggested an annuity. Your mother has undersaved - that makes her an ideal candidate for an annuity.
billfromct
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Re: Need investing advice for elderly mother

Post by billfromct »

Are her SS benefits based on her own earnings?

You don’t mention anything about your father. Is she a widow, divorced? Was she married for 10 years?

Did she look into spousal or survivor SS benefits If your father was a higher earner?

bill
bmcgin
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Re: Need investing advice for elderly mother

Post by bmcgin »

I am unsure if paying off the house is a good idea at this time. While being out of debt is great, that $50k might be needed for an income strategy or an emergency fund. Call Dave Ramsey and ask. Sometimes his advice is unexpected.

After thinking about it further, paying off the house would increase her monthly income. You did not mention the monthly payment, Just guessing it's around $1200. So by paying the $50k, she would gain $1200 in income which is more than $50k could earn elsewhere.
rossington
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Re: Need investing advice for elderly mother

Post by rossington »

InvestingDoofus wrote: Thu Jan 26, 2023 10:05 am
Peter Foley wrote: Wed Jan 25, 2023 7:36 pm Does she pay any income tax at all?
She was working in the first half of 2022, until the stroke. She did pay income tax. I don't foresee her having any sources of income outside of social security and whatever interest / dividends she makes on her investments going forward.
rossington wrote: Thu Jan 26, 2023 5:36 am Is the SS figure of $1750 net of the monthly Part B premium?
Yes, $1,750 net.
water2357 wrote: Thu Jan 26, 2023 4:17 am Look for a "certified elder law attorney" here is the association's website https://nelf.org/ talk to several to find one that fits what you need. Some are more interested in estate planning, look for one that is interested in obtaining the best care for your mother with the finances available.
Thank you. I did get POA. Talking to an elder care attorney definitely sounds like a good idea. I will do that.
bmcgin wrote: Thu Jan 26, 2023 12:37 am There is something else to consider. Most of the people in bogleheads would not recommend it. Nonetheless, it would work.

In this case, income is needed. JEPI is excellent at generating income and it pays monthly. In regular markets, the fund's documentation says it pays around 6% to 8% per month. It has been paying over 10% per month in the current down markets.
Thank you. I will look into it.
HomeStretch wrote: Wed Jan 25, 2023 9:31 pm Welcome to the forum!

For fixed income investments, consider US Treasuries purchased in a Fidelity Taxable account. Your mom’s after tax yield for 13-,26-,52-week T-Bills will likely be 4.5%+ (you can check recent auction results).

Does your mom have a durable power-of-attorney (DPOA) and healthcare POA naming you as her representative? Is the DPOA on file with her financial institutions?
Partially, I do have POA but not on file with the financial institutions. We definitely need to get that done. I will check into treasuries. Thank you.
What is your proximity to Mom? IOW can your family help with her transportation if she stops driving? If not does she have trusted friends/neighbors who can help her? If her health impedes her ability to drive a physician can make recommendations to the state if necessary to determine if she is capable of keeping her license.

Paying off the house seems to be the most appropriate solution...it would save the future interest and easily make up the current shortfall. I think that will help simplify future planning decisions.

For her own happiness I would make all attempts to allow her to live at home for as long as possible.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
water2357
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Re: Need investing advice for elderly mother

Post by water2357 »

As I mentioned previously, definitely talk to a certified elder care lawyer in PA before making any drastic changes to finances. And while adding your name to accounts may appear to simplify dealing with a particular bank, it also adds the risk of her losing her money based on some unfortunate incident in your life.

Find a bank and bank branch that will work with you with a POA and as a deputy on your mother's safe deposit box. Banks compliance with PA law on POAs and access to safe deposit boxes varies widely. It is best to find the right bank and the right brokerage (if you are using a brokerage) now, while your mother can sign documents for herself.

It can be unbelievably time consuming to end up dealing with a bank that won't automatically comply with PA law on POAs, etc. Find out the bank's requirements (basically what their legal department thinks is required even if different from PA law) and determine if you can work with them, should your mother not be able to communicate with them in person or on the phone.

And long term care facility contracts are not written in stone, if care is needed in a facility, a good lawyer will know which portions of the contract should be stricken out. Arbitration provisions generally should be removed.
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Peter Foley
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Re: Need investing advice for elderly mother

Post by Peter Foley »

In Minnesota one can establish a joint account for administrative purposes. That approach can be helpful especially if there are siblings with concerns regarding estate distribution.
Topic Author
InvestingDoofus
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Re: Need investing advice for elderly mother

Post by InvestingDoofus »

She is divorced. Her mortgage is approximately 700 per month. Her car loan is 0% APY, so there is probably not any real urgency to pay it off. Though considering she is unlikely to drive again, I am going to try to convince her to get rid of the car.

The car loan plus mortgage together equal around 1100 per month. Getting rid of those two payments together would put her in a decent financial situation, short of major medical expenses.

Her social security is based on her earnings.

She does she some family nearby that can drive her to appointments and such.

Thanks for the advice. There are many things mentioned that I will strongly consider and do.
HomeStretch
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Re: Need investing advice for elderly mother

Post by HomeStretch »

InvestingDoofus wrote: Sat Jan 28, 2023 9:03 am … Her car loan is 0% APY, so there is probably not any real urgency to pay it off. Though considering she is unlikely to drive again, I am going to try to convince her to get rid of the car.

… The car loan plus mortgage together equal around 1100 per month. Getting rid of those two payments together would put her in a decent financial situation, short of major medical expenses. …
Selling the car should also eliminate insurance, property taxes, gas and maintenance. For my mom, these items were almost $400/month.
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ram
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Re: Need investing advice for elderly mother

Post by ram »

300k House, 50k left on the mortgage (5% interest rate)
200k in savings
75k in IRA savings
1,750 per month for social security

Her expenses:

Equal approximately 2,300 per month.

400 a month of that is a car payment, which will kick out in 3 years or less if she is no longer able to drive.


Assets: 275 K.
Pay off 50 K mortgage and 14 K car loan.
Remaining assets: 211K.

Monthly expenses after car payment: 1900.
SS......................................... : 1750
Shortfall.................................. 150/mo or 1800/yr ( a 1% return on the assets of 211K will cover it)
Ram
bmcgin
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Re: Need investing advice for elderly mother

Post by bmcgin »

Budget:

Assets:
300,000 - house
200,000 - Savings
75,000 - IRA
unknown - car

Income:
1750 - Social Security

Expenses:
2300 - total expenses
=====
700 - house payment
400 - car payment
1200 - other (2300 - house - car)

Shortfall: -550 (2300 - 1750)

Current: 275,000 in cash, 1750 income, 2300 in expenses, -550 short

Forcast:
Option 1: Keep house, pay car, leaving 261,000 in cash and 1900 in expenses, -150 short
Option 2: Payoff house, keep car leaving 225,000 in cash and 1600 in expenses, 150 surplus
Option 3: Payoff house and car leaving 211,000 in cash, 1200 in expenses, 550 surplus

Investing in Money Market Account or Savings Account earning 4.25% (about today's rate):
275,000 would earn around: 973.96 // 423.96 surplus not paying off loans
261,000 would earn around: 924.38 // 774.38 surplus after paying car
225,000 would earn around: 796.88 // 946.88 surplus after paying house
211,000 would earn around: 747.29 // 1297.29 surplus after paying house and car

Option 3 generates the most monthly income (SS + Investment) because it reduces expenses the most.
Also, the investment is super low risk. The $211,000 would generate $747 so tapping into it would hurt.
Selling the car would create an additional $14k which could help too.

Investing a portion in an income fund such as JEPI can also generate more income if needed. This increases risk which may or may not be worth it.
water2357
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Re: Need investing advice for elderly mother

Post by water2357 »

When investing an elderly person's life assets, where that person may need those assets to obtain access to quality long term care, please evaluate all the risks involved in the investment, not just what looks like a high short term investment return. You need to evaluate the risk to the overall asset value and the type of assets and investment strategy of any stock, mutual fund, ETF, etc.

The 2008 market crash involved derivatives that prior to the crash were returning high yields, they ended up in many cases being worthless. And the funds that held those derivatives did not do well. It is best to understand the operation of underlying investments, particularly synthetic securities, or seek the advice of a trusted professional, such as a fee only based certified financial planner.
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